Denver Office Market Report Q3 2021
Leasing activity accelerated in the last six months as tenants took advantage of deals available in the market. But there's still uncertainty surrounding the pandemic's long-term impact on office space with many employers testing hybrid work models and right sizing their office footprint. In addition, headwinds from the Delta variant has dampened momentum with many employers continuing to push back returning to office.
Occupiers are starting to take advantage of the tenant favorable environment, particularly when it comes to the abundance of sublease listings that are typically offered at a steep discount. The uptick in sublet leases is helping to offset total available sublease space on the market, which began to decrease in 21Q2 for the first time since the onset of the pandemic. There is currently 4.2 million SF of available sublease space, down from the record high of 4.7 million SF that was recorded in the first quarter.
Since the beginning of 2020, over 6 million SF has been vacated across the Denver metro. Vacancy registers 14.4%, which is now above Great Recession levels. Looking ahead, the office market is projected to remain tenant-favorable, with vacancies continuing to rise through the second half of the year before beginning to compress in 2022 through the end of the forecast.
New construction deliveries have increased the amount of available space in the market over the past year. Thankfully Denver's office construction pipeline is thinning with only 1.3 million SF currently underway, a decrease of more than 50% from the previous year.
Denver's office market is in a period of heightened volatility, but there are reasons to be optimistic about its long-term health. Denver has enjoyed some big wins this year with the relocation and expansion of companies, and the market continues to diversify with the emergence of the tech sector's footprint in the local economy.